In this report, we show you how to navigate this transition from rising to falling markets in three stages.
The Titanic Moment
Most of us remember Leonardo DiCaprio and Kate Winslet frantically gripping the stern of the Titanic as it rose briefly and steeply out of the Atlantic before charging toward the ocean floor.
Well, as we’ve seen already, markets can make a similar melt-up just before sinking.
The trick, of course, is knowing when and how to ride the rise, avoid the sinking, and make money on the way down rather than drown.
This is easier said than done when it comes to gauging, timing, and trading the three stages of a stock market melt-up climbing toward a meltdown: (1) The ride up can be bumpy, (2) the “pause” before sinking is hard to time, and of course (3) the ride down is never straight down.
When the Nasdaq began sinking on April 15, 2000 (which, ironically, was the precise date the Titanic sank in 1912), it took another three years for it to lose 80% of its value.
During that slide down, the markets rose here and there in desperation before finally drowning in 2003 to its ocean-bottom lows.
The same was true of the Great Depression and the infamous crash of 1929. On the melt-up in 1928, the markets skyrocketed by 37%.
In 1929, those same markets then crashed and unleashed an economic disaster. But it took three bumpy years for the 1929 stock market to lose 90% of its value before hitting the ocean bottom.
In short, nothing happens in a straight line or without bumps and dips on the way up or temporary surges and gasps for life on the way down.
The key is to have a system and plan for tracking these phases with confidence and data rather than greed, fear, hope, or panic.
Critical Signals Report gives you the charts and compass to best approach each of these three critical phases of the melt-up leading into a meltdown.
Stage 1: Capturing the Last Breath of the Fed-Driven Bull Market
There’s no doubt that ever since the Fed stepped in to “support” the post-2008 markets, we’ve seen a heck of a ride up, with the S&P and Dow up over 300% in just over a decade.
And the S&P…
But as good (and crazy) as that was, this melt-up is different. This melt-up is the last, final, and steep rise of an otherwise dying market just before it pauses in mid-air (like the Titanic’s stern) and then begins its third-stage race to the dark depths of a market low.
Again, 1928 was a classic case of a such a melt-up, climbing by over 88% in two years before tanking…
The current market melt-up shares many of the characteristics of prior melt-ups. Namely, it is driven by a historic combination of key technical, psychological, and financial factors.
At the technical level, we are tracking what we call “signal boxes,” a technical support signal composed of either GREEN (positive) or RED (negative) time boxes that signal risk-on or risk-off based upon price movements in given time boxes.
These boxes are a critical part of our proprietary indicator that combines data on interest rate levels, Fed support, stock buy-back volume, moving averages, and other volatility bands.
Our indicator signals GREEN in bullish market conditions, including a melt-up, or RED in bearish, falling trends, including a meltdown.
At the psychological level, we know most investors have a “fear of missing out” and thus crowd into rising markets just before they crash – typically just as our indicators are turning RED.
In short, most investors go all in at precisely the wrong time.
Our signal boxes have been invaluable to us in tracking past market tops and capturing GREEN gains before markets turn dangerously RED.
Just before the dot-com bubble burst in 2000, for example, we rode markets until the GREEN turned to RED…
The same was true of markets climbing toward the 2008 crash. Our GREEN signal boxes kept us in the markets right until they turned RED. Thus, we avoided the epic losses which followed.
So long as the markets stay in the GREEN, investors following Critical Signals Report can capture gains on the final and often massive melt-up stage.
In 1928, our melt-up boxes would have looked like this, allowing us to make huge profits in the GREEN and then to avoid the bigger losses that came when the RED signal boxes showed up in 1929…
But it’s easy to backtest the 1929 history. Today, our melt-up boxes are still GREEN with melt-up upside for early to mid-2019 and look like this…
At some point, however, stocks hit a final peak and then begin to turn downward RED. This ushers in the next phase or stage. We are tracking this very carefully now – in real time.
Stage 2: Protecting Wealth as Markets Turn RED and Shorting Markets on the Way Down
At this stage, the general direction of the markets turns decidedly bearish. Again, this trend is gradual, not all at once. The markets will have momentary peaks, but the clear direction from such a signal is downward.
At this stage, we will provide signals and strategies that make money as markets decline.
This involves shorting stocks and buying inverse ETFs and put options that “short” (or bet against) the markets, as well as going long on those sectors (commodities, consumer staples, certain government bonds, etc.) that go up when markets are going down.
For those of you (especially those in or nearing retirement) who rightfully are more concerned with simply avoiding losses and protecting your gains rather than trading a RED market decline, we can also recommend going to cash.
This all hinges upon individual investors’ risk tolerances and profiles.
Unlike 1929, however, today the U.S. Fed will desperately try to prevent this sinking phase by printing more money (QE ad nauseam) or pushing down rates, perhaps even into negative rate territory.
If we see such moves, then we will have to adjust our investing strategy on the way down, as this phase is likely to see longer periods of temporary and totally Fed-driven surges.
If declining markets go from RED to GREEN and hold, our signals will change.
Primarily, however, this second stage of the meltdown phase trends decidedly south as markets begin their slow and steady slide, which can take years to hit their final bottom.
Based on basic mean-reversion analysis and historical precedent, as well as historical patterns, we foresee lows in the Dow as deep as a 70% loss (that’s 18,850 Dow points deep) and a similar decline in the S&P from the high 2,900-3,000 level to as low as 2,000 or more.
That’s right, lower than the 2009 bottoms. Why? Because we are not just dealing with a mortgage crisis this time. We are dealing with a corporate debt crisis and sovereign debt crisis at the same time.
As we approach these historic lows, we turn to the final and most profitable stage of the meltdown.
Stage 3: Making Money at Market Bottoms – the Real Key to Massive Wealth
The number-one rule to making a fortune in the stock market is this: Don’t get caught in a meltdown.
If markets lose 50% or more, you’ll need to see a recovery of far greater than 100% just to get back to where you started.
It can take years, even decades to “recover,” especially as the Fed runs out of printed money.
If it does print more, then it faces hyperinflation and a gutted currency. We’ll have to see what the Fed does as this phase plays out. Either way, the markets will be falling hard at this stage.
As markets near bottoms and stocks are trading at 60%, 70%, or even 80% or greater discounts as we saw after the U.S. crashes in 1929, 2000, and 2008 or the Nikkei crash in Japan of 1989, this is precisely the time to get back and start buying the bottoms.
Why? Because the second yet equally most ignored secret to making a fortune in the stock markets is buying at bottoms, not tops.
Almost no one follows this rule, but folks like John Astor, Joseph Kennedy, John Templeton, Warren Buffett, or Paul Tudor Jones all made fortunes following this simple, patient rule. So can YOU.
Will Critical Signals Report be able to perfectly call the next market bottom? Nope. No one can. But we sure can get you close enough. That’s key.
As markets ride up, pause, and then ride down to the bottoms, we hope you’ll stay informed with Critical Signals Report. In the interim, and as always, be careful out there. An iceberg is off the bow.